Key points of investment
We believe that Borui Pharmaceutical's business is in an upward breakthrough period. The API business is developing steadily, varieties with high barrier formulation potential are expected to gradually be commercialized, and the data reading of the weight loss drug BGM0504 is expected to bring about catalysis.
Incident: Clinical data on weight loss drug BGM0504 is about to be read
2024ADA, BGM0504 (GLP-1/GIP dual target), 2-week phase Ia data release, 2.5/5mg-5/10mg-10/15mg weight loss percentage range -3.24% to -8.30%, showing dose dependence. Also, the exposure was slightly higher than the same dose of tiverpotide.
As of April 27, 2024, BGM0504 weight loss and type 2 diabetes are in phase II clinical trials, and all subjects have been enrolled. Based on the follow-up time and data compilation time, it is expected that 2024Q3 data will be read out one after another, and the catalysis brought about by the disclosure of sugar reduction & weight loss data is expected.
Generic Pharmaceuticals: Heavy and High Barriers Generic Drugs Entering the Harvest Period
Eribulin injections have been delivered in 23 years. The major types of formulations of budesonide suspensions have been declared domestically. Potential varieties of ferric carboxymaltose injections, tiotropium odaterol inhalation sprays, and tiotropium bromide inhalation sprays are in the stability stage, and salmetroticasone inhalation powders are in the pilot phase, and are expected to enter the application and marketing stage one after another. Optimistic about the volume of potentially heavy and high-barrier varieties going public will drive an upward breakthrough in the company's performance.
APIs: Continued abundance of varieties, steady breakthroughs
According to the annual report, in 2023, elibulin mesylate, posaconazole, bromavudine, sodium dextrose, and everolimus obtained marketing approval, while denogestrel, riganosin, ioproamide, isaconazole sulfate, norepinephrine bitartrate, dopamine hydrochloride, and metoxylamine bitartrate are expected to continue to grow steadily under market development.
Profit forecasting and valuation
Our profit forecast for 2024-2025 was lowered because the company's R&D investment and cost-side expenses in 2023 exceeded our previous expectations. Considering that BGM0504 is still in phase II clinical in 2024 and R&D expenses are high. We expect the company's EPS to be 0.52, 0.61, and 0.73 yuan in 2024-2026 (before adjustment, the 2024-2025 EPS will be 0.75 and 0.92 yuan, respectively), and the closing price on June 27, 2024 will correspond to 65 times the 2024 PE. Considering the broad market space for weight loss drugs, we are optimistic about the BGM0504 data reading and the potential of the product after commercialization, and raise it to a “buy” rating.
Risk warning
Production safety accidents and quality risks; risk of sales of core formulations falling short of expectations; risk of excessive investment in innovative drugs or project failure; risk of exchange rate fluctuations; risk of order delivery volatility.